Could your brokerage survive a FINTRAC audit?

We have already witnessed the federal government targeting the real estate industry when it comes to money laundering and Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) compliance.

Large fines have been levied against brokerage firms that have not been in compliance at the time of the audit. Here are some questions to ask to see if you are ready in case the FINTRAC auditors come calling.

1. Does your firm have an up-to-date FINTRAC policy and a FINTRAC compliance officer? Has everyone in your firm taken the required training online?

It is not enough to just have a FINTRAC policy. Every member of the brokerage, including sales reps, brokers and all employees should have read your company FINTRAC policy and taken the five modules on money laundering available through CREA. This should also be documented and records must be kept of this.

2. Does your brokerage provide FINTRAC update education every two years for all members of the firm, to confirm that any new guidelines are understood and followed?

For example, new FINTRAC guidelines for identifying individuals will take place after  June 30, 2017. Is your firm aware of the changes? I have been providing FINTRAC update education courses for brokerages and real estate boards for the last several years. I have tried to demonstrate in my seminars that complying with FINTRAC  can actually increase business if approached in  a positive manner.

3. Does your firm properly identify clients?

This may be the most important information reviewed by FINTRAC auditors. Are you making sure that your clients have a connection to Canada? The more connected they are, the less likely they will be involved in illegal activities. The more you know about a client’s employment and occupation, the easier it is to build a relationship with them. And you are complying with FINTRAC at the same time.

4. What are you doing to monitor clients in a business relationship?

If a client conducts a second transaction with your brokerage within five years, they are said  to be in a business relationship with your firm and this may require ongoing monitoring.

Does your firm have a policy in place to identify whether any new client has in fact done a deal with your brokerage in the last five years, and if so, how is this client to be monitored? What additional questions should the client be asked about their new purchase or sale and whether they are in the ordinary course of the client’s business?

5. Every broker of record is required to do a comprehensive risk assessment of their brokerage every two years.

Unfortunately, most just check off some boxes  on a form, stating that they have checked their records and their risk has not increased. Unfortunately, in almost all audits that I have seen, this is considered to be a serious concern of the auditors. They expect you to have reviewed a substantial number of random files to confirm that all documents have been properly prepared, signed and filed and that you have also considered other factors, including whether your firm deals with properties that are close to the U.S. border, whether your agents are part-time or full-time and the general crime rate in your own area.

Does your brokerage insist, for example, that no commission will be paid unless and until all documents, including FINTRAC, are properly completed and filed? This should be standard practice.

by Mark Weisleder


This article originally appeared in the February 6, 2017 edition of REMonline. Reprinted with permission.

New FINTRAC requirements soon in effect

New FINTRAC requirements that were announced in 2016 are just now coming into effect for REALTORS® on various dates starting June 17, 2017.

These changes will affect you in four ways:

1) The way you identify individuals has been improved to add more flexibility. There are three methods for identification:

  • Using a single piece of government-issued photo identification
  • Verifying the client’s name, date of birth and address match information obtained from a Canadian credit bureau that has been in existence for at least three years
  • Using two original, valid and current documents or information from independent and reliable sources, such as utility bills or bank statements

2) Whenever your brokerage uses a mandatory to identify a client on your behalf, you will now have to keep more detailed records of when you received identification information from the mandatary. You will also need to review the information to make sure nothing is missing.

3) The regulations expand on existing obligations to keep a record when you use reasonable measures to satisfy certain obligations under the law. The reasonable measure record obligations are reflected in:

  • New sections A.4 and B.1 in the Individual Identification Information Record
  • New sections A.3 and B.1 in the Corporation/ Entity Identification Information Record
  • New section E of the Receipt of Funds Record (which has also been reorganized to reflect additional FINTRAC guidance)
  • New records related to large cash transactions and suspicious transactions

4) Clients who have been identified by your brokerage in the past do not need to be identified again if you or your Broker of Record/ Manager have no doubts about the information you obtained previously.

This is only a very brief summary of the changes taking effect in June, 2017. To read the details and get the information you need about changes to forms and what it all means for you, go to the CREA site on REALTOR Link® and check out the new information in the Compliance Centre. [REALTOR Link > CREA > Resources and Compliance > Compliance Resources > Money Laundering (FINTRAC)].

Once you are on the FINTRAC page, be sure you check out the links to helpful documents near the bottom of the page – all the material has been updated. The FAQ document may be particularly helpful.

All CREA forms have been updated to reflect your new obligations under FINTRAC. Revised forms are now available on WEBForms®.

(Note: you may use your old forms until June 17, 2017. After that time, only the revised forms will satisfy your obligations.)


Thank You to Our Sponsor:

FINTRAC Update

The monetary penalties called for in the 2008 legislation went into effect on December 30, 2008.

Violations are classified by the Regulations as “Minor”, Serious or “Very Serious”, and carry maximum penalties accordingly. The Administrative Monetary Penalty (AMP) program also has maximum penalties for individuals and entities (e.g. corporations) as follows:

Minor (individual/entity): $1 to $1,000
Serious (individual/entity): $1 to $100,000
Very Serious (individual): $1 to $100,000
Very Serious (entity): $1 to $500,000

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